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Household bargaining and the design of couples' income taxation

Author

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  • Roeder, Kerstin
  • Cremer, Helmuth
  • Lozachmeur, Jean-Marie
  • Maldonado, Dario

Abstract

The paper studies the design of couples income taxation when consumption and labor supply decisions within the couple are made in a cooperative way according to some bargaining scheme. Specifically, the couple maximizes a weighted sum of the spouses utilities. In the first part of the paper, the spouses bargaining weights (specific to each couple) are exogenously given. In the second part, these bargaining weights are endogenous, and depend on the spouses respective contributions to total family income. The information structure is the traditional one in Mirrleesian nonlinear income tax models. However, while the household s total consumption is publicly observable, the consumption levels of the individual spouses are not observable. The social welfare function is utilitarian. We show that the expression for a spouses marginal income tax rate includes a Pigouvian (paternalistic) and an incentive term. With exogenous weights the Pigouvian term favors a marginal subsidy (tax) for the high-weight (lowweight) spouse, whose labor supply otherwise tends to be too low (high). In some cases both terms have the same sign and imply a positive marginal tax for the low-weight spouse and a negative one for the high-weight spouse.

Suggested Citation

  • Roeder, Kerstin & Cremer, Helmuth & Lozachmeur, Jean-Marie & Maldonado, Dario, 2014. "Household bargaining and the design of couples' income taxation," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100586, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc14:100586
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    References listed on IDEAS

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    Cited by:

    1. Patricia Apps & Ray Rees, 2018. "Optimal family taxation and income inequality," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(5), pages 1093-1128, October.
    2. Cremer, Helmuth & Lozachmeur, Jean-Marie & Roeder, Kerstin, 2017. "Household Bargaining, Spouses' Consumption Patterns and the Design of Commodity Taxes," IZA Discussion Papers 10557, Institute of Labor Economics (IZA).
    3. Barigozzi, Francesca & Cremer, Helmuth & Roeder, Kerstin, 2019. "Till taxes do us part: Tax penalties or bonuses and the marriage decision," European Economic Review, Elsevier, vol. 118(C), pages 37-50.
    4. Cremer, Helmuth & Roeder, Kerstin, 2019. "Income taxation of couples, spouses’ labor supplies and the gender wage gap," Economics Letters, Elsevier, vol. 175(C), pages 71-75.
    5. Barigozzi, Francesca & Cremer, Helmuth & Roeder, Kerstin, 2017. "Until taxes do us part: tax penalties or bonuses and the marriage decision," TSE Working Papers 17-858, Toulouse School of Economics (TSE).
    6. Takuya Obara & Yoshitomo Ogawa, 2020. "Optimal Taxation in an Endogenous Fertility Model with Non-Cooperative Couples," Discussion Paper Series 211, School of Economics, Kwansei Gakuin University, revised Jan 2021.
    7. Komura, Mizuki & Ogawa, Hikaru & Ogawa, Yoshitomo, 2019. "Optimal income taxation when couples have endogenous bargaining power," Economic Modelling, Elsevier, vol. 83(C), pages 384-393.
    8. Takuya Obara & Yoshitomo Ogawa, 2021. "Optimal Taxation in an Endogenous Fertility Model with Non-Cooperative Couples," Working Papers e157, Tokyo Center for Economic Research.

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    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • D10 - Microeconomics - - Household Behavior - - - General

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